Cryptocurrency operators are required to be licensed with NBFIRA by May 25 or face fines of up to P250,000 and/or five years in jail, under the recently passed Virtual Assets Act.
Yellow Card, a cryptocurrency exchange that allows clients to buy, sell and store bitcoin and other virtual assets, is active in 16 African states.
Yellow Card’s local country manager, Keletso Thophego told BusinessWeek the exchange had a “massive presence” in Botswana and enjoyed the largest market share.
“Yellow Card has already approached both the regulators in NBFIRA and the Financial Intelligence Agency,” he said in an emailed response to enquiries. “The process to get licensed is already in motion.”
Although founded in Nigeria, Yellow Card withdrew from its home market in February 2021 after the Central Bank of Nigeria (CBN) released a publication prohibiting commercial banks and all financial institutions from interacting with cryptocurrency entities and individuals.
However, in October of the same year, the CBN launched the eNaira, a digital form of the country's currency, which some cryptocurrency operators took as a signal to resume operations. In April, however, Bloomberg reported that the CBN had fined three banks P23 million for allowing cryptocurrency trades.
Officials at NBFIRA recently said while the regulator had received several enquiries regarding licensing requirements, no applications had been received ahead of the May 25 deadline.
Through the Virtual Assets Act, Botswana has become one of the few countries in Africa formally recognising and regulating cryptocurrency, a multi-billion pula global market rapidly gaining traction in the continent.
The local legislation, passed early in February, was designed to clamp down on the use of cryptocurrencies and other virtual assets in money laundering, financing of terrorism and other illicit activities, in line with the requirements of the Financial Action Task Force (FATF).
Thophego said Yellow Card was working with regulators across the world to provide assurances to concerned authorities.
“We work with regulators, financial authorities, banks and law enforcement agencies in any given country from inception,” he said. “We try to do everything transparently and fairly and liaise via our parent entity with the US Department of Homeland Security for additional guidance in countries that may not yet be open to regulating and monitoring the crypto sector.”
He added: “Yellow Card complies with global anti-money laundering, sanctions as well as the FATF Travel Rule requirements and Know Your Customer all of our customers across all jurisdictions. “We are also registered on GoAML and with local Financial Intelligence Units in most of our jurisdictions to help report on anti-money laundering, sanctions and financial crime matters.”
Meanwhile, the FATF, which is the world’s leading inter-governmental agency on Anti-Money Laundering/Combatting the Financing of Terrorism (AML/CFT) standards, says 58 out of its 128 member states report that they are now implementing the standards around virtual assets.
FATF media relations manager, Duncan Crawford told BusinessWeek that out of the 58 member states, 52 had laws regulating virtual assets while six prohibited these activities.
“The other 70 jurisdictions have not yet implemented the revised standards in their national law,” he said. “These gaps in implementation mean that there is not yet a global regime to prevent the misuse of virtual assets and VASPs for money laundering or terrorist financing.”
Crawford said as at June 2021, 27 jurisdictions had undergone reviews of their compliance with the FATF’s standards on virtual assets. While the FATF noted progress with regards to regulation and monitoring of virtual asset activity amongst countries, the agency has raised concern around poor implementation of the ‘travel rule', which mandates that providers of virtual assets obtain, hold and exchange information about the originators and beneficiaries of virtual asset transfers.
In addition, the FAFT has noted that most of the illicit conduct involving cryptocurrencies is conducted on a 'peer-to-peer' basis, meaning without the need for an intermediary such as Yellow Card, which can be monitored by regulators.
According to the FATF’s latest research, between 2016 and 2020, up to 60% of bitcoin transactions were peer-to-peer, while more illicit activity took place peer-to-peer than through intermediaries such as exchanges.
“Virtual asset service providers face significant money laundering and terrorist financing risks,” Crawford said. “There is a growing body of serious cases demonstrating misuse (and) in some cases, the victims are the virtual asset service providers themselves as well as their customers. “The use of virtual assets also adds complexity to emerging types of crime – ransomware for example, in addition to facilitating more 'traditional' types of criminal activity.”
The FATF spokesperson said countries needed to demonstrate enhanced vigilance to the various loopholes through which crypto activity involving criminal actors can take place.
“Countries need to show they are regulating crypto companies and can identify, trace, freeze and confiscate virtual assets, such as cryptocurrencies and coins,” he told BusinessWeek. “Anti-money laundering measures apply in full – in the same way traditional financial institutions such as banks are regulated and monitored.”
